Health Net, Inc. (NYSE:HNT) today announced that it has entered
into a master services agreement with Cognizant Healthcare
Services, LLC, an indirect, wholly owned subsidiary of Cognizant
Technology Solutions Corporation (NASDAQ:CTSH) (Cognizant), a
leading provider of information technology, consulting and business
process services.
Health Net previously announced on August 6, 2014, that it had
signed a Letter of Intent with Cognizant as part of Health Net’s
commitment to address its scale issue and reduce administrative
costs.
Under the terms of the seven-year master services agreement,
Cognizant will provide consulting, technology and administrative
services to Health Net in the following areas: claims management,
membership and benefits configuration, customer contact center
services, information technology, quality assurance, appeals and
grievance services, and medical management support. As part of the
agreement, Cognizant will be responsible for meeting specific
targets for improving the quality, effectiveness and efficiency of
many of Health Net’s operating metrics. Such metrics include claims
processing and routing times, customer contact center response
times, and contact center customer satisfaction targets.
Under the agreement, the services Cognizant will provide must
meet all regulatory compliance requirements, which will be
monitored through Health Net’s dedicated governance and oversight
structure.
In addition, Health Net and Cognizant have entered into an asset
purchase agreement for the sale of certain Health Net software
assets and related intellectual property to Cognizant, including
Health Net’s technology platform. Cognizant expects to use and
develop this technology platform to provide enhancements to Health
Net’s operations.
The master services agreement is currently expected to generate
approximately $150 to $200 million in annual general and
administrative and depreciation expense savings by 2017. During its
third quarter 2014 earnings conference call on November 3, 2014,
the company will provide more details as to the timing of the
expected savings.
The master services agreement is expected to accomplish several
goals:
- Continue and enhance Health Net’s
delivery of high service levels for Health Net’s members and
providers;
- Create new opportunities for innovation
in Health Net’s products and services;
- Strengthen Health Net’s technology
platform;
- Allow Health Net to more efficiently
use its capital resources; and
- Enhance Health Net’s ability to
effectively meet all regulatory and health care reform compliance
requirements.
“What’s important about this new agreement with Cognizant is
that there are specific, measurable outcomes that we believe will
contribute to reduced administrative costs and support future
growth and innovation,” said Jay Gellert, president and chief
executive officer of Health Net.
“Once implementation begins, we will pay Cognizant on a fixed
fee basis. We will eventually pay Cognizant on a per member per
month basis. With such predictable costs for us, we believe we will
achieve the necessary scale advantages to enhance our product
development and service capabilities, thus strengthening our
competitive position for the long term,” he added.
The transaction, including the related asset purchase, is
expected to close in the first half of 2015, subject to receipt of
required regulatory approvals.
About Health Net
Health Net, Inc. is a publicly traded managed care organization
that delivers managed health care services through health plans and
government-sponsored managed care plans. Its mission is to help
people be healthy, secure and comfortable. Health Net provides and
administers health benefits to approximately 5.9 million
individuals across the country through group, individual, Medicare
(including the Medicare prescription drug benefit commonly referred
to as “Part D”), Medicaid, U.S. Department of Defense, including
TRICARE, and Veterans Affairs programs. Health Net also offers
behavioral health, substance abuse and employee assistance
programs, managed health care products related to prescription
drugs, managed health care product coordination for multi-region
employers, and administrative services for medical groups and
self-funded benefits programs.
For more information on Health Net, Inc., please visit Health
Net’s website at www.healthnet.com.
Cautionary Statements
The company and its representatives may from time to time make
written and oral forward-looking statements within the meaning of
the Private Securities Litigation Reform Act (“PSLRA”) of 1995,
including statements in this and other press releases, in
presentations, filings with the Securities and Exchange Commission
(“SEC”), reports to stockholders and in meetings with investors and
analysts. All statements in this press release, other than
statements of historical information provided herein, may be deemed
to be forward-looking statements and as such are intended to be
covered by the safe harbor for “forward-looking statements”
provided by PSLRA. These statements are based on management’s
analysis, judgment, belief and expectation only as of the date
hereof, and are subject to changes in circumstances and a number of
risks and uncertainties. Without limiting the foregoing, statements
including the words “believes,” “anticipates,” “plans,” “expects,”
“may,” “should,” “could,” “estimate,” “intend,” “feels,” “will,”
“projects” and other similar expressions are intended to identify
forward-looking statements. Actual results could differ materially
from those expressed in, or implied or projected by the
forward-looking information and statements due to, among other
things, health care reform and other increased government
participation in and taxation or regulation of health benefits and
managed care operations, including but not limited to the
implementation of the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010
(collectively, the "ACA") and related fees, assessments and taxes;
the company’s ability to successfully participate in California’s
Coordinated Care Initiative, which is subject to a number of risks
inherent in untested health care initiatives and requires the
company to adequately predict the costs of providing benefits to
individuals that are generally among the most chronically ill
within each of Medicare and Medi-Cal and implement delivery systems
for benefits with which the company has limited operating
experience; the company’s ability to successfully participate in
the federal and state health insurance exchanges under the ACA,
which have experienced technical challenges in implementation and
which involve uncertainties related to the mix and volume of
business that could negatively impact the adequacy of our premium
rates and may not be sufficiently offset by the risk apportionment
provisions of the ACA; increasing health care costs, including but
not limited to costs associated with the introduction of new
treatments or therapies; our ability to reduce administrative
expenses while maintaining targeted levels of service and operating
performance, including through our master services agreement with
Cognizant; whether we receive required regulatory approvals for
Cognizant’s provision of services to us and any conditions imposed
in order to obtain such regulatory approvals; our ability to
recognize the intended cost savings and other intended benefits of
the Cognizant transaction; and the risk that Cognizant may not
perform contracted functions and services in a timely, satisfactory
and compliant manner; negative prior period claims reserve
developments; rate cuts and other risks and uncertainties affecting
the company’s Medicare or Medicaid businesses; the company’s
ability to successfully participate in Arizona’s Medicaid program;
trends in medical care ratios; membership declines or negative
changes in our health care product mix; unexpected utilization
patterns or unexpectedly severe or widespread illnesses; the timing
of collections on amounts receivable from state and federal
governments and agencies, including collections of amounts owed
under the T-3 contract; litigation costs; regulatory issues with
federal and state agencies including, but not limited to, the
California Department of Managed Health Care, the Centers for
Medicare & Medicaid Services, the Office of Civil Rights of the
U.S. Department of Health and Human Services and state departments
of insurance; operational issues; changes in economic or market
conditions; failure to effectively oversee our third-party vendors;
noncompliance by the company or the company’s business associates
with any privacy laws or any security breach involving the
misappropriation, loss or other unauthorized use or disclosure of
confidential information; impairment of the company’s goodwill or
other intangible assets; investment portfolio impairment charges;
volatility in the financial markets; and general business and
market conditions. Additional factors that could cause actual
results to differ materially from those reflected in the
forward-looking statements include, but are not limited to, the
risks discussed in the “Risk Factors” section included within the
company’s most recent Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q filed with the SEC and the other
risks discussed in the company’s filings with the SEC. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Except as may be required by law, the company
undertakes no obligation to address or publicly update any
forward-looking statements to reflect events or circumstances that
arise after the date of this release.
Investor Contact:The Abernathy MacGregor GroupDavid
Olson, 818-917-1469dwo@abmac.comorMedia Contact:Health Net,
Inc.Brad Kieffer, 818-676-6833brad.kieffer@healthnet.com
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